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Physical Distribution

Physical Distribution. Marketing Co-Op. What is Physical Distribution?. The key link between a business and its customers – also known as logistics Logistics – the process of physically delivering goods to customers

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Physical Distribution

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  1. Physical Distribution Marketing Co-Op

  2. What is Physical Distribution? The key link between a business and its customers – also known as logistics Logistics – the process of physically delivering goods to customers Comprises ALL activities that help to ensure the right amount of a product is delivered to the right place at the right time

  3. Distribution Careers Supply Chain and Distribution Opportunities at Target

  4. Inventory • Inventory – All the goods shipped and stored by a business before it is sold

  5. Distribution Activities • Ordering Processing – placing and organizing product orders • Transporting - moving goods from sellers to buyers • Storing - holding the goods while they await transport • Stock Handling -shipping, receiving, and checking goods • Inventory Control – controlling and cataloging merchandise while in storage

  6. It can be Costly!! • Physical Distribution is the 3rd largest expense for most businesses • Surpassed only by the cost of material and labor

  7. Types of Transportation Systems Trucking Railroads Marine Shipping Pipelines Air Cargo Services

  8. Trucking Types of Carriers Common Carriers – Provide transportation services to any business for a fee • Accounts for 1/3 of all motor freight Ex: UPS, Fed Ex Contract Carriers – for-hire carriers that provide equipment and drivers for specific routes between the carrier and the shipper Ex: Estes, Pitt Ohio

  9. How UPS Works

  10. Trucking Types of Carriers Private carriers – transport goods for an individual business - Businesses can lease equipment or own their own fleet

  11. Trucking • Mostly commonly used mode of transportation • Carry high value products that are expensive or impossible to keep in inventory Ex: Produce

  12. Trucking Intermodal Transportation – combines two or more transportation modes to maximize the advantages of each Interstate Transportation – when distribution crosses over state lines

  13. Railroads Most useful for delivering bulky freight Coal Chemicals Grain Lumber Steel Farm Equipment Shippers pay a lower rate if they fill an entire boxcar Carload– the minimum number of pounds of freight needed to fill a boxcar

  14. Railroad Transporting Advantages Disadvantages Lacks flexibility Can only be delivered to stations along designated rail lines Require another form of transportation to get goods to storage location • Very low cost • Use 50-70% less energy than trucking • Seldom slowed or stopped by bad weather

  15. Marine Shipping Barges and container ships transport merchandise around the world Regulated by The United States Maritime Commission

  16. Marine Transporting Advantages Disadvantages Slowest form of transportation Require another form of transportation to get goods to storage location It is affected by bad weather and seasonal conditions • Cheapest form of transportation

  17. Pipelines Advantages Disadvantages High initial investment, but lower operational costs Products move slowly Most commonly used to transport oil and natural gas • Best safety record among all major transportation systems • Suffer minimal damage or theft • Are not affected by bad weather The risk of a pipeline leak are low, but if one does occur, the damage to the environment can be extensive

  18. Air Cargo Service Advantages Disadvantages Most costly form of transport (twice as costly as motor transport) Can easily be delayed by bad weather and mechanical issues Represents less than 1% of the total freight shipped Mostly used for high-value, low-weight, time-sensitive items – like overnight mail • The speediest form of transport • Reduces inventory expenses and storage costs

  19. Transportation Service Companies • U.S. Postal Service • Ships small packages by parcel post or first class mail • For an extra fee, packages can be insured against loss or damage • Bus Package Carriers (Greyhound) • Provide transportation service for packages under 100 pounds • Provide same-day or next-day service to cities and towns along scheduled route • Cost – based on weight of package and distance traveled

  20. Transportation Service Companies • Express Delivery Service • Specialize in delivering small, lightweight packages and high priority mail (less than 150 pounds) • Rates based on speed of delivery, size and weight of package, type of delivery required • Freight Forwarders • Private companies that combine less-than-truckload shipments and deliver them to the destination • Combining multiple shipments helps to reduce rates for shippers

  21. PHYSICAL DISTRIBUTION ACTIVTY: to illustrate the importance of protecting & transporting products in a timely manner. -To demonstrate how difficult it can be to transport products from one location to another, five groups of students have to transport the following items using limited utensils ¼ cup of water a balloon Spaghetti 1/8 cup of salt an egg -You are not allowed to just carry the water or salt in the cup. Utensils include paper lunch sacks, straws, chop sticks, spatula, and tongs. -Students will be divided into teams (try to have no more than 4 to a team). Goal: to be the first team to transport all products from one side of the room to the other. It makes a great ice breaker for distribution.

  22. SHIPPING TERMS F.O.B. (free on board) destination • the title of ownership remains with the seller until the goods reach destination F.O.B. shipping point • the buyer pays the shipping costs and is responsible for losses F.O.B. factory freight prepaid • seller pays shipping charges • goods become the property of the buyer at the factory F.O.B. destination charges reversed • merchandise becomes the buyer’s only when goods are received • buyer pays for shipping charges

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